China’s leading online ride-hailing platform Didi went public on Wall Street on Wednesday, bringing an end to a year of intermittent lockdowns for ride-hailing and travel companies due to the epidemic. Didi’s opening price on the New York Stock Exchange was $16.82 per share, a 20% increase from its issue price of $14 per share. But investor interest cooled in a day, Didi closed at $14.20, and the company’s market value exceeded $69 billion.
Wall Street continues to welcome fast-growing technology companies, regardless of their profitability. In particular, ride-hailing companies such as Uber and Lyft have proven to be profligate money-burning companies, often burning billions of dollars in cash each year. Didi is no exception. The company lost $1.6 billion last year but reported a profit of $30 million in the first quarter of this year. The company expressed in a regulatory document that due to the epidemic, its revenue last year fell by 8% to 21.63 billion U.S. dollars.
Although Didi has a dominant position in China and some other countries, the company may face special scrutiny from investors due to continued tensions between China and the United States. The U.S. government has included some Chinese technology companies on a list that restricts the ability to do business with the U.S. or its trading partners.
Investors may also be wary of regulators in the country where Didi is based. China’s antitrust agencies have begun vigorously censoring the country’s large Internet companies. Last year, Chinese regulators began to crack down on what they called unfair and anti-competitive business practices in the Internet industry.
In December last year, a taxi industry organization wrote to China’s antitrust regulator, urging it to reassess Didi’s 2016 acquisition of Uber’s business in China. The agency has investigated the transaction on antitrust grounds but has not taken any action. The letter accused Didi of using unfair subsidies to retain passengers and dispatching orders to unlicensed drivers and vehicles.
In April of this year, Didi was one of more than 30 Chinese Internet companies interviewed by regulators. The regulators ordered them to ensure compliance with antitrust rules and put national interests first. Didi quickly issued a statement, and the antitrust regulator posted it on its website. Treina said that regulatory pressure had raised questions about whether Didi will be allowed to grow to a sustainable, profitable scale. Both Didi and Uber have made Latin America the focus of global expansion. However, the number of new coronavirus cases in the region continues to rise, which may adversely affect growth plans.